Vietnamese bank lending contracted in the first two months of this year after growing 9 percent last year, which was the slowest pace in at least two decades.

The monetary authority this week cut its policy interest rates, the seventh such reduction since the start of last year, after inflation slowed to 6.64 percent this month. The refinancing rate is now 8 percent compared with 15 percent at the end of 2011.

The benchmark VN Index rose 0.5 percent as of the mid-day break in trading as Asian shares climbed on US economic data. The Vietnamese dong gained 0.1 percent to 20,935 per US dollar.

Vietnam’s economy grew 5.03 percent last year, the slowest pace since 1999, and the World Bank predicts expansion of 5.5 percent this year.

That would mark the first time in at least two decades that the nation expanded less than 6 percent for three straight years.

Retail sales increased 11.7 percent in the first quarter from the same period a year earlier, slowing from a 21.8 percent pace in the same period a year earlier, the Statistics Office also said yesterday.

The struggling economy and labor market cut into purchasing power, the agency said in a summary.